Senate Votes to Eliminate Ethanol Tax Break

Senate Votes to Eliminate Ethanol Tax Break

WASHINGTON, DC, June 17, 2011 (ENS) – The U.S. Senate Thursday voted 73-27 in favor of an amendment by Senator Dianne Feinstein, a California Democrat, to eliminate the Volumetric Ethanol Excise Tax Credit and repeal the import tariff on foreign ethanol.

This amendment to the Economic Development Revitalization Act is identical to the Ethanol Subsidy and Tariff Repeal Act, which was introduced in May by Feinstein and Senator Tom Coburn, MD, an Oklahoma Republican.

The bipartisan vote drew some of the Senate’s most conservative and progressive members together to end the tax giveaway, which primarily benefits big oil companies.

“Today’s overwhelming vote shows a bipartisan consensus to repeal irresponsible ethanol subsidies and tariffs,” Senator Feinstein said. “The 73 votes sent a powerful message that the days of big subsidies for ethanol are coming to a close. We must be serious about addressing the debt and deficit, and this is a good first step.”

The ethanol subsidy currently gives large oil companies 45 cents for every gallon of ethanol they blend with gasoline, even though much of that use is mandated by law.

Tax credits for ethanol are set to expire at the end of 2011, but if signed into law the amendment approved by the Senate would revoke the $6 billion tax credit by July 1, and could save $2.7 billion dollars this year. Similar legislation is pending in House of Representatives.

“Ethanol is the only industry I know of that receives a triple crown of government support: its use is mandated by law, it enjoys protective tariffs and oil companies receive federal subsidies to use it,” Senator Feinstein said. “These flawed policies, which cost taxpayers nearly $6 billion a year, must be changed.”

The ethanol tariff is comprised of a 54-cent-per-gallon secondary tariff and a 2.5 percent tax. The ethanol tariff makes the United States nation more dependent on foreign oil by increasing the price of imported ethanol.

“Senators scored a win for the public and for the environment by voting to end this $6 billion giveaway,” said Kate McMahon, biofuels campaign coordinator at Friends of the Earth.

“Ending this subsidy will help reduce the deficit, have almost no impact on jobs and limit support for this polluting industry. We thank the senators for reaching across the aisle to send a decisive message that the ethanol industry’s days of living high off the taxpayers’ hog have come to an end,” said McMahon.

Friends of the Earth is part of a diverse coalition of environmental groups, business associations, taxpayer advocates, hunger and development organizations, agricultural groups, free-market groups, religious organizations, budget hawks and public interest watchdogs that have mounted a multi-year campaign to end the wasteful tax break promoting corn ethanol.

But farmers say they will be hurt if the tax break is revoked. National Farmers Union President Roger Johnson said, “With the addition of this amendment, NFU opposes the Economic Development Revitalization Act. Nothing in this legislation is worth paying the high costs of eliminating the ethanol tax credit. We strongly urge members of the U.S. Senate to stand up for rural America, and all Americans, by opposing this legislation.”

“High energy prices are already damaging a very fragile economic recovery. This amendment, which cuts all tax credits for ethanol and biodiesel as of July 1, will push energy prices higher,” Johnson warned.

Pointing to a recent study by Iowa State University and the University of Wisconsin showing that ethanol reduces gas prices by an average of 89 cents per gallon, Johnson said, “Ironically, this tax credit that saves Americans nearly a dollar per gallon of gasoline is cut, while Big Oil subsidies, which cost a total of $40 billion per year, are allowed to continue.”

“The passage of this amendment is not just a loss for rural America, but for all of America,” said Johnson. “The elimination of this tax credit will seriously harm a legitimate and viable alternative to oil. Ethanol is a homegrown fuel that will help reduce America’s dependence on foreign oil and give us more control over our fuel supply. It is also a cleaner alternative to oil.”